UNICHEM LABORATORIES LTD.versusCOLLECTOR OF CENTRAL EXCISE, BOMBAY

                    UNICHEM LABORATORIES LTD.                                 A
                                      v.
            COLLECTOR OF CENTRAL EXCISE, BOMBAY

                           SEPTEMBER 3, 2002

     (SYED SHAH MOHAMMED QUADRI AND RUMA PAL, JJ.]                            B


     Central Excise Tariff Act, 1985:

       Chapter 29-Sub-heading 2913.00-Bulk drugs-Excise duty on-
Exemption Notification No. 234186 dated 3.4.1986 exempting bulk drugs from C
excise duty w.ef 1.3.1986-Assessee manufacturer filing classification lists
on 3.3.1986 also showing the bulk drugs liable to 15% duty as per the extant
provisions-Later, after issuance of Notification No. 234186 assessee filing
certificate of the Drug Controller and claimed exemption benefit under
Notification No. 234186-Exemption denied by the Revenue as also by Customs, D
Excise and Gold (Control) Appellate Tribunal on the ground that assessee did
not claim benefit of exemption at the time offiling classification lists so as to
enable the Assistant Collector to fix a period for production of certificate from
Drugs Controller that drugs were bulk drugs-Held, denial of benefit of
exemption notification to manufacturer was unfair-No time has been fixed by E
"proper ofjicer"for filing the certificate ofDrugs Controller-Nor is it provided
that benefit of exemption should be claimed at the time offiling ofclassifica/ion
lists-Notification No. 234186 squarely applies to the manufacturer-
Manufacturer is entitled to benefit of the notification from the date of filing
the classification lists.
                                                                               F
     CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3880/1993.

     From th.e Judgment and Order dated 27.4.1993 of the Customs Excise
and Gold (Control) Appellate Tribunal New Delhi in Appeal No. E.7171788-
C.
                                                                              G
      Sandeep Narain, for Mis. S. Narain & Co. for the Appellant.

     Rajiv Nanda and B. Krishna Prasad, for the Respondent.

     The following Order of the Court was delivered :
                                                                              H
                                     87
    88                         SUPREME COURT REPORTS [2002] SUPP. 2 S.C.R.

A        The challenge in this appeal is to the correctness of the order of the
    Customs, Excise and Gold (Control) Appellate Tribunal, New Delhi in Appeal
    No. E/717/88-C. dated 26th April, 1993.

          The point that arises for consideration is; whether the appellant is entitled
    to the benefit of Notification No.234/86, dated April 3, 1986, granting
B   exemption to bulk drugs falling under sub-heading 2913.00 of Chapter 29 of
    Schedule to the Central Excise Tariff Act, 1985 from the date of filing of
    classification lists.

          It would be relevant to refer to the facts giving rise to this appeal.

c        The appellant is a manufacturer of bulk drugs. The drugs manufactured
  by it were classified under tariff item 68 of the erstwhile Central Excise
  Tariff and they were exempt under Notification No.234/82 dated 1.1.1982.
  With effect from 1.3.1986, the new classification was given effect to under
  the Central Excise Tariff Act, 1985 (for short' the Act') On March 3, 1986,
D under the Act the appellant filed classification lists categorizing the bulk
  drugs under the new tariff heading 30, having nil rate of duty. The
  Superintendent, Central Excise corrected the classification as falling under
  heading 2913.00 and pointed out that the bulk drugs were exempted. At that
  time, the rate of duty payable under heading 2913.00 was 15% and that was
  what the appellant had shown when it refiled the classification list. However,
E the appellant subsequently claimed the benefit of the said notification no.234/
  86 dated 3.4.1986. To comply with the requirement of the said notification,
  the appellant appUed for a certificate to the Drugs Controller of the Government
  of India. The said certificate was issued on 24.6.1986. The appellant submitted
  the said certificate to the concerned authorities. On the ground that the appellant
F was not eligible for exemption and the duty payable at the rate of 15% was
  not paid, the Assistant Collector, Central Excise, issued three show cause
  notices on 24.7.1986, 6.11.1986 and 6.1.1987 which relate to the periods
   1.3.1986 to 2.4.1986, 11.4.1986 to 27.7.86 and 28.7.1986 to 20.11,1986
  respectively. Rejecting the claim of the appellant for exemption under
G notification no. 234, dated 3.4.1986, the Assistant Collector confirmed that
   it was liable to pay duty at the rate of 15%. On appeal, the Commissioner
  (Appeal) upheld the order of the Assistant Collector. On further appeal, on
   April 26, 1993, the CEGA T confirmed the order of the Commissioner
  (Appeals) on the ground that the appellant did not claim the benefit of
  exemption at the time of filing the classification list so as to enable the
H Assistant Collector to fix a period for production of certificate from the
        UNICHEM LABORATORIES LTD. v. C.C.E. BOMBAY,                          89
 I
Drugs Controller of the Government of India to the effect. that the drugs A
claimed for exemption were bulk drugs within the meaning of the explanation
to the notification. It is that order of the CEGA T that is assailed in this appeal

      We heard the learned counsel for the pal1ies.

      There is no dispute that the bulk drugs manufactured by the appellant        B
fall under Chapter 29 and are classifiable under sub-heading 2913.00. It is
also not in dispute that the rate of excise duty payable against such goods is
I5%. It is admitted that on 3.4.1986, Notification No. 234/86 was issued by
the Central Government granting exemption to bulk drugs classified under
Chapters 28 and 29. It would be useful to read the notification here:
                                                                                   c
           "In exercise of the powers conferred by sub-rule (I) of rule 8 of
       the Central Excise Rules, 1944, the Central government hereby
       exempts bulkdrugs, falling under Chapter 28 or Chapter 29 of the
       Schedule to the Central Excise Tariff Act, 1986 (5 of 1986), from the
       whole of the duty of excise leviable thereon under section 3 of the         D
       Central Excise and Salt Act, 1944;

        Provided that the manufacturer furnishes to the proper officer, a
        certificate from the Drugs Controller to the Government of India,
        within such period as the said officer may allow, to the effect that the
        drugs or chemicals which are claimed for exemption under this              E
        notification are the bulk drugs within the meaning of the bulk drugs
        given in the explanation to this notification, and are normally used
        for the diagnosis, treatment, mitigation or prevention of diseases in
        human being or animals, and used as such or as ingredient in any
        formation.
                                                                                   F
        Explanation - In this notification, "bulk drugs" means any chemical
        or biological or plant product, conforming to pharmacopoeia\
        standards, normally used for the diagnosis, treatment, mitigation or
        prevention of diseases in human being or animals, and used as such
        or as ingredient in any formation.
                                                                                   G
      (Notification No. 234/86 C.E. dated 3.4.86)"

      A perusal of the notification, quoted above, shows that it has three
limbs. The first limb exempts the bulk drugs falling under Chapter 28 or
Chapter 29 of the Schedule to the Central Excise Tariff Act, 1985. The
second limb contains a proviso which embodies the conditions for availing H
    90                         SUPREME COURT REPORTS [2002] SUPP. 2 S.C.R.

A the exemption. There are four requirements: (i) the manufacturer has to furnish
    to the "proper officer" a certificate from the Drug Controller of the Government
    of India; (ii) the certificate has to be furnished within such time as may be
    allowed by the said officer; (iii) the certificate must contain the recital that
    the drugs or chemicals which are claimed for exemption under the notification
B   are the bulk drugs within the meaning of the explanation to the notification;
    and (iv) the bulk drugs are normally used for diagnosis. treatment, mitigation
    or prevention of diseases in human being or animals, and used as such or ::is
    ingredient in any formation. The third limb consists of the explanation which
    defines the expression 'bulk drugs'.

C          It is worth noticing that no time has been fixed by the "proper officer"
    for filling certificate of the Drug Controller of the Government of India by
    the manufacturer. Nor is it provided that the benefit of the exemption should
    be claimed at the time of filing of classification lists. The notification squarely
    applies to the appellant and indeed the benefit thereunder was extended from
    November 21, 1986 - the date of filing of amended list - instead of from
D   March 3, 1986 and April 3, 1986 when classification lists were first filed. It
    is nobody's case that the appellant was not manufacturing build drugs during
    the relevant period.

          The reason given by the Assistant Collector that the appellant itself
E indicated the rate of duty payable as 15% cannot be taken as a factor against
    it because, admittedly, the rate of duty payable in respect of the goods
    classifiable under sub-heading 29I3.00 is 15%. The fact that the said
    notification has exempted the payment of.duty in respect of bulk drugs falling
    under the said sub-heading is an admitted fact . The Tribunal also erred in
    holding that the appellant should have claimed the benefit of the notification
F   at the time of the filing of classification lists which is extraneous to the claim
    of exemption under the notification. That apart, the classification lists were
    filed by the appellant on 3.3.1986 and 3.4.1986 whereas, admittedly, the said
    exemption notification came to be issued only on 3.4.1986. The requirement
    which was insisted upon by the authorities and confirmed by the Tribunal,
G   was a impossibility.

           It has been noted above that the bulk drugs manufactured by the appellant
    fell under tariff item 68 of the erstwhile Central Excise Tariff and the appellant
    was enjoying exemption under Notification No.234/82. Tariff Item 68 of the
    old Act is, in terms, identical to sub-heading 2913.00 of the Schedule to the
H   Act. As on .the date of filing of the classification list, the earlier notification
          UNICHEM LABORATORIES LTD. v. C.C.E. BOMBAY,                           91

 no. 234//82 was not operative. It was in all fairness that the appellant indicated   A
 the rate of duty payable @ l 5% without indicating the exemption in view of
 the change in the system brought about by the Central Excise Tariff Act,
 1985.

         The notification under the Act - No. 234/86 - which came to be issued
  on April 3, 198.6, exempts bulk drugs classified under sub-heading 2913.00          B
  and the classification lists were filed by the appellant before issuance of the
  notification. Further, having regard to the fact that the Act came into force
  on the 28 February, 1986, the Parliament passed the Central Duties of Excise
. (Retrospective Exemption) Act, 1986 which provides for a new tariff,
  nomenclature as also rates of duties of excise. Section 2 of the said Act says.     C
         "2. Retrospective effect for certain notifications.-(1) Every
         notification issued by the Government of India in the Ministry of
         Finance (Department of Revenue) on or after the 3rd day of March,
         1986, but before the 8th day of August, 1986; in exercise of the
         powers conferred by sub-rule (I) of rule 8 of the Central Excise             D
         Rules, 1994, for the purpose of,-

         (a) maintaining the effective rates of duties of excise in respect of
             certain goods at the level obtaining prior to the 28th day of
             February, 1986 notwithstanding the changes in the rates of duties
             of excise made by the Central Excise Tariff Act, 1985, the               E
             Additional Duties of Excise (Textiles and Textile Articles)
             Amendment Act, 1985 or the Additional Duties of Excise (Goods
             of Special Importance) Amendment Act, 1985; or

         (b) maintaining the effective rates of duties of excise in respect of        F
             certain goods at the level obtaining prior to the !st day of March,
             1986 notwithstanding the changes in the rates of duties of excise
             made by the Finance Bill, 1986;

 shall, in so far as such notification relates to such goods, be deemed to have,
 and to have always had, effect on and from the I st day of March, 1986."             G
                                                             •
       This provision is self evident. The said Act was passed on 9th September,
 1986. In view of the provisions of Section 2 of the said Act, quoted above,
 Notification No. 234 dated 3.4. I 986 would relate back to March 1, 1986.
 Consequently, the appellant became entitled to the benefit of Notification No.
 234/86 from !'v1arch 1, 1986.                                                        H
    92                         SUPREME COURT REPORTS [2002] SUPP. 2 S.C.R.

A        For the aforementioned reasons, we are of the view that denial of
  benefit of the notification to the appellant was unfair. There can be no doubt
  that the authorities functioning under the Act must, as are in duty bound,
  protect the interest of the Revenue by levying and collecting the duty in
  accordance with law-no less and also no more. It is no part of their duty to
B deprive an assessee of the benefit available to him in law with a view to
  augment the quantum of, duty for the benefit of the Revenue. They must act
  reasonably and fairly.

           In the result, the order under challenge is set aside and it is held that
    the appellant is entitled to the benefit of the exemption under the said
C   notification from March l, 1986, the date of filing classification lists.

           The appeal is, accordingly, allowed. There shall be no order as to costs.

    R.P.                                                          Appeal allowed.




                                                                                       -